Question

What is the expected quarterly return for a stock that is priced at $140, is expected...

What is the expected quarterly return for a stock that is priced at $140, is expected to pay a dividend of $35 every year forever, and is expected to pay its next dividend in 1 year?

A.

100.00%
B.

Answer is not listed or is not possible
C.

25.00%
D.

400%
E.

6.25%
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Answer #1

Expected yearly return on the stock could be the amount of the dividend paid on the overall share price of this stock.even though we use face value to calculate the rate of return of dividend but since the amount of dividend is already given and only the market price of share is given, return to be calculated would be-

Annual return=[dividend paid/market price]×100

=(35/140)×100

= 25%

So quarterly return equals to=( 25%/4)=6.25%

Correct answer is option (E).

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